By: David A. Smith
Thought of the day, courtesy of my most faithful reader: If Vladimir Putin hadn’t wasted $50 billion (yup, billion) creating the instant-white-elephant of Sochi’s Olympics, he would have had the cash to buy Greece out of its difficulties and dramatically upset the European applecart.
”So, Vlady, you got that fifty extra-large you promised me?”
“Sorry, Alex, I blew it in Sochi.”
“Then why the crap am I faking to like you?”
And while Boston’s 2024 Olympics, should the worst happen and they come to our city, couldn’t possibly cost that much (though I hear Michael McLaughlin is available), money spent there would undoubtedly represent affordable housing not created in favor of a Mega-boon or mega-boondoggle: Part 1, An extravagant proposal:
As soon as the news broke in January that somehow, against all implausibility, the United States Olympic Committee (USOC) had decided to award Boston the right to be the US’s candidate to host the 2024 summer Olympics, my reaction, along with that of virtually everyone whose opinion I eventually encountered, could be distilled to a single expression of disbelief: “Have they ever been here?”
Boston? Not LA?
And that spluttering reaction got me digging into both why I thought Boston’s bid so blindingly stupid, and also why I found myself reacting so strongly against the anodyne promises that somehow this Olympics would be for Boston a boon rather than a boondoggle.
Mega-events are televised spectacles that happen to need a place for them to be staged. The place itself is unimportant and largely invisible to the global viewing audience:
Wow, it’s great to stage the Olympic cycling final here in London … or Beijing … or Athens … or wherever the heck we are
One can ask whether the Olympics, now just a bit more than a century old, still have any meaningful place in global sports. The twentieth century saw the rise of national, international, and global sporting leagues – soccer pre-eminent, basketball second, baseball and cricket sharing third – that now supply 24/7 continuous streaming of season, off-season, shoulder season, trophy season, pre-season. And they do so without necessarily spending public money [Emphasis on ‘necessarily’ – Municipalities have proved all too willing to leap at the prospect of building expensive and questionably cost-effective stadia – Ed.], unlike the Olympics, where Part 2, Overruns are virtually certain, Part 3, Contradict prior assurances, Part 4, “To an extent, this is a tradeoff”, Part 5, Only non-democratic countries will pay up, and Part 6, We don’t need an aristocracy:
FIFA will never run out of new mugs; so enraptured is the world with soccer football that there will always be a dictator or populist somewhere who wants to showcase his people’s paradise.
If the sponsors and the big leagues (like UEFA) are serious about rooting out FIFA corruption, they will need comprehensive reform to FIFA’s governance, taking all of Mr. Zimbalist’s recommendations above as the starting point, and expanding from there.
Meanwhile, we are unlucky that no such scandal has overtaken the IOC, and unlike in FIFA there are no leagues to create regional clout, only national Olympic committees and federations.
You think I’ve resigned, but I actually haven’t
But these reforms just tinker with the basic problem: There’s one monopoly seller of the rights to the games—the IOC—and prospective hosts from around the globe competing for the honor.
Hosting the Olympics remains a mug’s game.
If Boston ultimately puts up a frugal, few-frills bid, Berlin, Paris, Rome, Istanbul, Casablanca, Johannesburg, Doha or Melbourne will no doubt step in with something fancier and more expensive.
Please God they do.
As the blog has evolved over its decade-plus, my typical post has lengthened, because I’ve found my value-additive niche lies in reorganizing and exploding a prevailing media narrative shaped by journalists who lack the sector expertise or the investigative time [Apparently – Ed.] to challenge the sound bites with evidence by using the Web’s insta-search capacity to juxtapose the past’s grand promises alongside the present’s busted realities, as presented in my lengthy exposition of the stranglehold CalPERS gradually put upon California’s municipal finances, in The curse of the Gray PERL: Part 1, “Repetition of incorrect statements does not make them correct”:
At the outset, two myths inherent in the rhetoric of this case need to be dispelled. Repetition of incorrect statements does not make them correct.
[1] Pensions may, as a matter of law, be modified by way of a chapter 9 plan of adjustment.
[2] A CalPERS pension serving contract may be rejected without fear of an enforceable termination lien.
A well-written judicial decision is a work of it not art then fine craftsmanship, and an absorbing treat for those who are of the right disposition and interest and who have or can somehow wangle the time to read it carefully – and one such is In re City of Stockton (pdf, also available in text here), Case 12-32118-C-9, as decided by Christopher M. Klein, chief bankruptcy judge of the eastern District of California, whose ruling in the Stockton bankruptcy I originally thought unfair to a group of bondholders.
A judge who will sleep better knowing that the AHI blog has validated his opinion: Christopher M. Klein
With the decision’s publication, I realized that the reporting was incomplete in that it omitted key facts and legal facts, so in another post during May I promised “to return to CalPERS’s evil-empire behaviors.” In parsing through the decision, I realized that not only is it fine work for itself – as a ruling in a municipality bankruptcy cast – it does much more. In addition to settling some key questions once and for all (assuming that if appealed it is upheld, which I am confident it will be), it does two other tremendously valuable things, if only we have the wit to see them:
1. Educates newcomers as to how California’s municipal finances were taken over and subverted by clandestine pension-fattening. Call that story the Curse of the Gray PERL.
2. Offers a roadmap for municipalities into and out of insolvency.
In this post I tootled along for many segments, including Part 2, “Raise the city’s sales tax to restore city services”, Part 3, “CalPERS does not bear financial risk”, Part 4, “CalPERS is not an ordinary contractual counterparty”, Part 5, “The CalPERS board gets to block changes”, Part 6, “The CalPERS obstacles are not effective in bankruptcy”, Part 7, “CalPERS says the city would owe it $1.6 billion”:
Now readers fully understand, as laid out by Stockton Judge Christopher Klein’s bankruptcy decision and opinion (In re City of Stockton), CalPERS’ unique position under California law. CalPERS had a position so advantaged, relative to any competitor and particularly relative to the cities who hired the company, as to constitute restraint of trade – the cities who trusted CalPERS to invest their money and to estimate fairly how much that corpus needed to be supplemented would awake one decade to find that CalPERS had mis-estimated, failed to achieve its cheerfully promised returns, and was now demanding a big plus-up from cities who were over-extended financially and strapped for cash and options.
Let’s talk about how much you owe
Ordinarily, a customer dissatisfied with its advisor would fire the advisor, compel a change in management, or at a minimum change its actuaries and get reliable information – remarkably, under the PERL as it metastasized, a typical city could do none of those things:
· By law, the board was elected by public-employee union members (or elected officials who would owe their victories to union contributions), and un-fireable.
· By law, the actuaries were chosen by the board subject to no external review or check.
· By law, if a locality exited from CalPERS, it owed a plus-up (an ‘enforceable termination lien’) in an amount determined solely by CalPERS.
“Honey, can we rethink that decision to have kids?”
Now, as to that exit payment (termination lien), it’s time to see how the stacked deck that the California legislature (and a former governor) gave CalPERS is used to guarantee the company always holds aces and the exiting municipality can be dealt a new hand of deuces:
Like Frodo, I had no idea when I began exploring the problem of municipal bankruptcy four and a half years ago that it would lead into public-employee pension fund accounting and CalPERS:
One does not simply walk into CalPERS
But each step led to another, both in my virtual journey of discovery and in California’s financial journey to ruination, shown in Part 8, “Promises of higher pensions to get through labor negotiations”, and Part 9, “CalPERS has bullied its way about with an iron fist”:
The assertion that CalPERS is the largest creditor of the City is not correct. CalPERS in its own right is only a small-potatoes creditor for the expenses that it is entitled to charge for administering the City-sponsored pension.
In that ‘small potatoes’ phrase, one can hear the disgusted judge enjoying his wielding of the scalpel to expose CalPERS’ hypocrisy.
I have come with glorious purpose
The judge also enjoyed writing this:
CalPERS has bullied its way about in this case with an iron fist insisting that it and the municipal pensions it services are inviolable. The bully may have an iron fist, but it also turns out to have a glass jaw.
Uppercut! Uppercut!
That CalPERS glass jaw, the judge was delighted to hit:
CalPERS does not bear financial risk from reductions by the City in its funding payments because state law requires CalPERS to pass along the reductions to pensioners in the form of reduced pensions. Rather, it is the pensioners, present and future, themselves who are at risk of loss.
Finally, during June I looked, via the eyes of a New York Times reporter who moved to Delhi without fully appreciating what he and his family would be in for, at Urbanization’s side effects: Part 1, Air, water, food, and flies:
“Before you go home,” a World Bank executive resident in Delhi told me, two days into a three-week trip that the Boss and I took (mix of AHI business and vacation), “you will get a respiratory disease.”
Smokestacks in Delhi obscured by smog
Of course he was right; we finished the tour with inflamed eyes and throats and hacking coughs, and were never so happy as to get back home. What we experienced, we now know, is common among Westerners who move to India, as reported poignantly by Gardiner Harris in the The New York Times (May 29, 2015):
Mr. Harris’s story is poignant, because he is plainly in love with the idea and mystery of India, but in the end he leaves it, because Part 2, you should not raise children in Delhi, Part 3, Irreversible lung damage from poisoned air, and Part 4, I hope so, anyway:
Is this how you want me to grow up?
We don’t consciously use children as guinea pigs, but Delhi subconsciously uses poor children as guinea pigs.
These and other experts told me that reduced lung capacity in adults is a highly accurate predictor of early death and disability — perhaps more than elevated blood pressure or cholesterol. So by permanently damaging their lungs in Delhi, our children may not live as long.
And then there are nascent areas of research suggesting that pollution can lower children’s I.Q., hurt their test scores and increase the risks of autism, epilepsy, diabetes and even adult-onset diseases like multiple sclerosis.
I believe it all.
And here lies the great unvoiced truth about the Western campaign for a sustainable planet: Forget about California lawns; forget about jet planes; forget about Priuses. If we are serious about climate change, if we want to do something that will move the needle in a big way, instead of chastising the West, figure out how to provide development support for India.
We can never expect the Indians who live in Delhi to return to the countryside. We cannot ask them to stay non-industrialized and poor for our sake. We cannot ask them to follow Scrooge’s bitter advice of dying soon to decrease the surplus population.
The boys are excited. Aden, 12, wants a skateboard and bicycle, accouterments of freedom in a place he is allowed to wander by himself. His younger brother’s wish may be harder to realize.
“My asthma will go away,” Bram said recently. “I hope so, anyway.”
Humans are resilient, we are enterprising, and we are optimists. Bollywood has become a multi-billion-dollar global industry by delivering stories of struggle, aspiration, love, triumph, and happy endings.
To the multi-ethnic, multi-cultural, multi-economic future
It’s up to us to write that story.
Fog, smog, and sunshine: Delhi at dawn